Patents are the wrong target

When the World Health Assembly met in Geneva last week, scores of nongovernmental organizations descended on the city to lobby for a new cause in global health care: eliminating the patent system.

Faced with the knowledge that 30 percent of the world lacks access to life-saving medicine, advocates like Doctors Without Borders and Oxfam have marshaled their forces to convince members of the World Health Organization to scrap the patent system. They believe their efforts will increase access to vital pharmaceuticals in the third world. However, while no one would question the motives of these groups, if they are successful they will endanger the lives of the very people they are trying to help.

Well-meaning NGOs oppose patents because the temporary monopoly that patents provide allows pharmaceutical companies to charge high prices for their medicines. What these NGOs fail to consider is what would happen without patent protection.

Development of pharmaceuticals is among the most expensive and risky business propositions in the world. Only .02 percent of chemical compounds tested by a pharmaceutical company will ever go to market. Each drug takes 10 years to develop and costs about $1 billion. And of the few medicines that do eventually reach consumers, 70 percent will never be profitable.

Without the protection of patent rights it would be impossible to ever turn a profit developing new medicines.

Rather than attacking the patent system, these NGOs should focus on the real obstacles to getting patients the medicine they need.

Poverty is, of course, the greatest threat to world health. In poor countries about 45 percent of the cause of disease is related to poor nutrition, indoor air pollution, and lack of proper sanitation. Poverty also impedes access to pharmaceuticals, but not just because of price.

“It is very obvious that the elephant in the room is not the current price of drugs,” according to Kevin De Cock, the director of WHO’s HIV division, in 2006. “The real obstacle is the fragility of health systems. You have health infrastructure that is dilapidated, and supply chains that don’t exist.”

Poor nations lack the infrastructure needed to distribute drugs. Good doctors, nurses, and hospitals to administer the drugs properly are also lacking. In fact, according to one World Bank study, education, distance, culture, and other factors that affect the demand for medicine may be more important determinants of access than price.

Without correcting these basic problems, reducing the price of pharmaceuticals will have a negligible impact on the availability of drugs worldwide.

Of course, price is not irrelevant when it comes to accessing medicine. But even here patents do not deserve all the blame. Governments have erected unconscionable tax burdens on medicine. Taxes, duties, tariffs, and markups by government procurement agencies all inflate the cost of drugs. In some countries these policies contribute more to the final price than the manufacturer’s price.

These taxes contribute little revenue and harm the most vulnerable members of society. Eliminating them would be a low-cost means of expanding access to medicine.

In addition to eliminating these government-created price increases, there are a number of reforms that can be undertaken to increase access without eliminating the patent system that ensures continued research and investment in pharmaceuticals.

Strengthening the patent systems in the third world would encourage pharmaceutical companies to invest in medicine to combat the diseases of poverty.

Governments could work to expand pre-existing incentives for research in neglected disease. The U.S. Orphan Drug Act, enacted in 1983, provides tax credits and market exclusivity for developing treatment for rare diseases. Annual creation of new treatments for rare diseases was 12 times greater in the 16 years following the passage of the Orphan Drug Act than in the previous decade. The success of the legislation has led to similar models in Japan and the European Union.

Researchers at Duke University have proposed a voucher system that would reward companies that develop new treatments for neglected diseases with vouchers for a Federal Drug Administration “priority review” of any other drug. This voucher would potentially increase revenue by hundreds of millions of dollars. Part of these revenues could be used by companies for philanthropy toward third world countries to help them in acquiring patent products. Vouchers could even be paid by companies at an affordable price, to be used by governments to provide medicine to poor countries.

Combined with the Orphan Drug Act, the voucher system would provide a powerful incentive to develop new treatments.

NGOs like Oxfam and Doctors Without Borders provide fantastic humanitarian aid to the third world. But when the World Health Assembly and other international bodies meet, officials should advance policies that have proven effective rather than radical political agendas that will help no one.